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Much attention has been paid this week to Activision's decision to turn Call of Duty Elite in to a free service - a somewhat embarrassing climb-down for the company, which only a year ago was making a great deal of noise around the launch of this much-vaunted subscription service for the game.

The problem, of course, is that Call of Duty Elite was really designed to solve a business problem, not any issue with the game itself. Activision has two major cash cows - World of Warcraft and Call of Duty. The former has a recurring subscription base, pulling in steady revenue month after month, as well as providing tidy spikes of income around the launch of expansion packs. The latter, however, is a seasonal product - it has one (absolutely huge) launch each year, and then trails off rapidly. In fact, it's been trailing off more rapidly of late, with the game's sales curve looking more and more front-loaded - big opening weekends, weaker long-term demand.

Activision's thinking with Call of Duty Elite was pretty transparent. Call of Duty would be an even more appealing product from a financial perspective if it had an element of subscription revenue - another steady month-to-month earner, just like World of Warcraft. It was from that thinking that Elite was born, I suspect - the company asked "how can we add a subscription service element to CoD?", rather than coming up with something cool, asking "how can we make this into a business?" and arriving at the subscription model as being the best option.

"The problem, of course, is that Call of Duty Elite was really designed to solve a business problem, not any issue with the game itself."

What hasn't really been addressed in the talk about Elite's demise as a subscription service, however, is that one aspect of the service will continue to be paid-for - the content which it provided. I have a deep suspicion that hardly anyone subscribed to Elite for access to the Elite service itself, but quite a few people probably subscribed for the guaranteed access to all of CoD's DLC packs which a subscription included. These DLC packs will still exist, of course; players will even still have the option of buying them individually, or purchasing a "season pass" - effectively a subscription - that covers all of them. In other words, on a financial level, Activision will still have some recurring income from CoD - but it'll come from players paying for DLC, not paying for access to a service.

That, perhaps, highlights the real difference that Activision would have wished to make to the CoD business. Right now, CoD is about as traditional a games business as you can imagine. Activision's developers build content and sell it - in a box once a year, as supplementary downloads a few more times a year. The revenue Activision can make from CoD can grow according to how many customers it reaches, but it is limited by how much content its developers can create (and how much the market wants).

The holy grail here is something quite different - a transplantation of ideas from the subscription MMO business, whereby consumers aren't paying for content, they're paying for a service, and (potentially, although Elite didn't go down this path) for cheap to create and free to duplicate virtual items. In other words, a model where you're not really selling access to content any more - instead, you have a business that's vastly more scaleable (and far less subject to piracy). Tempting - yet only a year later, Activision is retreating from Elite already. Why?

The answer, I think, is that the company has been burned - and forced to realise that when it comes to choosing what you sell and how you sell it in today's games industry, "pick a lane and stick with it" is an extremely important lesson. Activision tried to be greedy, mixing and matching the best of all possible worlds. It wanted to sell you content, at a premium price no less, but it also wanted to sell you a service. Consumers are willing to buy content (mostly, and there's some debate over whether that'll last forever, but it's certainly true now).

They're also willing to pay for subscriptions, and they're willing to buy virtual goods. However, I don't think they're willing to do all of those things at once - in fact, they resent it deeply. The root cause of most discontent with modern business methods in the games industry, in my view, comes from companies attempting this kind of "bait and switch"; selling you content, and then having the temerity to ask for money for virtual goods afterwards, or for a subscription.

"Games that don't charge up-front for content have free license to charge for other stuff later on. Not everyone likes it, but it's fairly clear that it's not unfair, or exploitative, or anything like that."

Here's an example. I recently, finally, got around to playing Mass Effect 3 properly. I happily paid for two large packs of DLC (From Ashes and Leviathan), an investment of about $20 in buying content. However, I gradually realised that I was also going to have to buy an online pass for the game - not for the multiplayer aspect particularly, but because part of the singleplayer experience (the Galaxy at War component, which encompasses multiplayer and a host of other stuff) wasn't accessible without an online pass, and my copy was borrowed from a friend.

I resented that, deeply, on a very instinctive level. Sure, I hadn't paid for the game, and I accepted that if I wanted multiplayer (a service offering, fundamentally) I'd need an online pass. However, by buying two expensive packs of DLC, I'd firmly slotted this game, in my thinking, into the "paid-for content" pigeonhole. When it then became apparent that I'd also have to pay for something that wasn't content - a service payment - that seemed grasping and unpleasant on EA's part.

Games that don't charge up-front for content have free license to charge for other stuff later on. Not everyone likes it, but it's fairly clear that it's not unfair, or exploitative, or anything like that. It's simply a different way of doing business. However, games which do charge for content have established a clear relationship with their users - you've bought this. Its yours. Enjoy it how you please. Then turning around and saying "oh, now pay us for a service offering, and for virtual goods" genuinely is exploitative, and consumers are quite right to resent it.

In short, if Activision wants to try to transition Call of Duty to a different business model - fine. I'd applaud that, actually - I think that if incumbent market leaders aren't willing to disrupt their own cash cows, they invite someone else to come along and do the disruption for them. So launch a new Call of Duty, make it free, monetise it with subscriptions or virtual goods, launch it on unexpected new platforms - whatever. Be brave and bold, and see what the market wants and what it'll support.

"Elite, however, was the over-cautious and underwhelming attempt at "evolution" of a franchise that you'd expect to be cooked up by a room full of career accountants"

Elite, however, was the over-cautious and underwhelming attempt at "evolution" of a franchise that you'd expect to be cooked up by a room full of career accountants - and it was pretty disrespectful of the player base in the process. It was an attempt to clutch on firmly to the money Activision already makes by selling Call of Duty as a piece of content, while also trying to make extra money from new business models - despite the fact that those business models were developed to work for games that don't sell their content, at least not at the kind of premium price Activision demands for CoD.

Selling games and DLC packs isn't a bad business - and while I'd be fascinated to see Activision experiment wildly and bravely, I'd also be happy to see them stick with what works. Selling subscriptions and virtual goods is a good business too. But the two of them simply don't mix, and Elite is a pretty good example of why. Pick a lane and stick with it. If you're selling content, sell content - because once users have bought that content, coming back with a begging bowl for more money is just bad business.

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"I recently, finally, got around to playing Mass Effect 3 properly. I happily paid for two large packs of DLC (From Ashes and Leviathan), an investment of about $20 in buying content. However, I gradually realised that I was also going to have to buy an online pass for the game - not for the multiplayer aspect particularly, but because part of the singleplayer experience (the Galaxy at War component, which encompasses multiplayer and a host of other stuff) wasn't accessible without an online pass"

I thought Leviathan came out after the Extended Cut which removed the need for the Galaxy at War being above 50%(The default) for all ending variations (There was one very short scene unobtainable before that). TBH I think the Mass Effect 3 Online pass is a good idea as so far the Multiplayer component has been supported by multiple updates without splitting the userbase

Indeed yes, install the free Extended Cut DLC and it drops the requirement for the "best" ending to one manageable without using GaW. However, before EC was released it was as Rob says. So you could say that they did try and gouge you, it's just that they've already backed down. ^_^

Hm - if that's the case, then there's been really poor communication of that fact within the game. I've got Extended Cut installed, but I still had a Galaxy At War screen which sat at 50% and implied strongly (through the surrounding text) that it would impact on what happened in the narrative. The text on the Extended Cut DLC on Xbox Live makes no mention of any change to this. I'm not sure how, exactly, anyone is meant to know that anything has changed...

The point about the psychology of purchase remains, though - the reason I felt aggrieved about paying for the Online Pass isn't because I think it's necessarily bad business (I grudgingly agree with EA's stance on online passes in general), but because I'd already paid for a lot of game content. I'd classed this as an "I pay for content" deal, not an "I pay for a service" deal; being asked to do both things was a really negative consumer experience. (Easy solution, in this specific instance: bundle an Online Pass with purchases of large DLC packs. This has the bonus of making your first DLC pack a no-brainer for second-hand purchasers.)

I broadly agree with you, but think "paymium" is definitely gaining ground. Infinity Blade makes >50% of its money from IAP on iOS and we will see more games with an upfront payment model also trying to get more money from their biggest fans.

The real trick is to make people believe that they can play the game that they paid for and the additional elements offer them personalised value (status, display, progress, power and so on), rather than acting as gating items on their fun. That is a very difficult challenge for traditional developers to get their heads around.

@Rob: Your Effective Military Strength (EMS) is your Total Military Strength (TMS) multiplied by your Readiness Rating (RR). Your EMS is what matters when it comes to deciding on how "good" your ending is, your TMS is what you build up by completing missions and side quests and by scanning planets, your RR increases if you play GaW (and decreases back down to 50% if you don't play for a while, which also sucks).

Without any GaW action, the readiness rating (RR) will remain at 50%. Prior to the Extended cut it was impossible to get a TMS high enough with your RR at 50% to have an EMS high enough to get the "best" ending, unless you had access to more TMS provided by DLC and/or you played GaW. What the Extended Cut does is lower the EMS requirement for the "best" ending so that you can get it even if your RR is at 50% and you only have access to the TMS you can get from the base game.

You know after all the out cry concerning Mass Effect 3 ending and multiplayer. I gotta say im very happy with what they have done. They fixed the ending and the multiplayer is turning out to be lots of fun. The challenges provide an extensive amount of reasons to keep playing and the N7 weekly challenges provide even more. Each character in each class is different enough to provide a fresh expirience. And the maps have added hazards and interactive content that allows for enviromental damage or ambient obstacles such as sandstorms that keep you from having great vision or acid rain that comes and goes and when the rain starts you have to go inside a building or else your shield wont charge up if you stay in the rain. They even added the volus as a multiplayer character. And its funny seeing them running around. On top of all this they added new enemies and objectives such as escort and retrieve onbjects that really alter the way you play at a random pace. Right now Mass Effect 3 multiplayer is my favorite online game. And what i like the most is that it does not alter the single player expirience in any way, it really does feel like a seperate game. If you choose not to play it, its ok. It wont affect the main game.

@Sam - Wow, if this is true then I might resume playing ME3. I'd basically shelved it when it started looking like I needed to play the multiplayer to be able to succeed at the single player - as you and Rob state it clearly communicates this very badly if I never have to touch that component (doesn't interest me at all).

It amazes me in this day and age when developers assume you'll go and investigate all this for yourself outside the game. I'd say the opposite is true - it doesn't take much for me to up-sticks and move onto the next in my pile of unplayed titles; I'm short on playtime, and patience, not content.

The point about the psychology of purchase remains, though - the reason I felt aggrieved about paying for the Online Pass isn't because I think it's necessarily bad business, but because I'd already paid for a lot of game content.

Except you didn't actually pay for the game itself, you admittedly "borrowed" it. Paying for extended singleplayer content doesn't entitle you for access to the multiplayer component, which is clearly meant to be for customers who legitimately purchased the full game, or purchased the pass.

@Jed: I don't think the details are actually in the game at all, just in the EC's release notes. I actually found the full details here (warning, spoilers). Short form is pre-EC you needed 4000+ EMS to get the "best" ending, post-EC you only need 3100+.

And yes Rob, remember that GAME LENDING IS KILLING THE INDUSTRY and will shortly be an offence punishable by death. ^_^

I agree, Elite simply looked liked a greedy move to most gamers and that's why Activision's plan in it's original form failed. After all Valve has been offering content and service, and managing to make a huge fortune from doing it. Elite will likely have greater success as a free service that sells some DLC, trickles a few free content updates and charges micro-payments for aesthetic items. They would have been better off incorporating the Elite into Battle.net too.

Bruce - I stated pretty clearly that I totally understood and supported the fact that the multiplayer (as a service offering) required an Online Pass, either from buying first-hand or bought online. That wasn't at issue; the perception that there was also singleplayer content being locked away or made difficult to access was the issue. Psychologically, this mixing of paying for content and paying for a service / virtual good element was a problem.

I think the past decade has proven pretty convincingly that a really, really fast way for a business to collapse is to ignore the psychology of sales and instead grouch about its own perceptions of morality when customers don't act how they want them to.

Sorry. I really think you're clutching at staws here Rob. I see programs like Elite and Battlefield Premium as kind of like "Season Pass Plus". You get all the DLC for an upfront charge and you get extra "community" stuff too. I think the problem is actually that people don't think the "community" stuff is worth paying for. Hence Activision probably saw less uptake of Elite than they thought they would. Perhaps also less engagement with the game on the whole as a result. I certainly didn't play as much MW3 as I did Black Ops.

I don't think people resent the idea of a paid Elite (well maybe some people do). I just don't think most people can see the value.

You get all the DLC for an upfront charge and you get extra "community" stuff too. I think the problem is actually that people don't think the "community" stuff is worth paying for.

To be honest, it's not that community aspects aren't worth paying for, it's that there's no industry-wide shift towards paying for community features. Taking BF3 as an example, BattleLog is an "okay" community oriented feature. But the real hardcore BF3 players install the free Better BattleLog add-on. This has more details regarding bullet-drop, range, and damage. Again, this is free. The Nexus community create mods for RPGs that are free. All of Valve's community-oriented features are free. I can go on and on (but won't :p ). Tell me again why I should pay for a community feature? :)

"GAME LENDING IS KILLING THE INDUSTRY" ? Give me a break. If i buy a game i can lend it, trade it, give it away, whatever I damn well please. While the game is no longer in my possession I cannot take advantage of my online pass. If anything, the online pass should be integrated into the disc and go where the game goes. Does no one remember that games cost around £40-£50 on release? To pay that for every game is unaffordable for most people in the real world and unsustainable.

You think charging more money for one particular game increases revenue to the games industry? It's a joke. As gamers are forced to pay more and more to play their favourite games, industry analysists scratch their backsides wondering why games sales are falling across the board and the window for premium sales gets smaller. Duh!

If I buy a book, a movie, an album, a newspaper or even a car. I can lend it to friends, share it with my household or partner, do anything I want. Why is the games industry so up itself that it has to have special rules that apply to no-one else? Once, one day back somewhen, someone realised that games were no longer played just by kids, but by adults. And with adults comes income which it seems to acceptable to skim.

The truth of the matter is, once upon a time you bought a game and that was it til the next game. Now it is all about how can we wring the last penny out of gamers and cut off any potential way of them recouping money for trading or re-selling or discounting games to players who simply cannot afford the release date prices of games today. It's greedy and it's disrespectful.

And if games companies moan one more time about the recession and job cuts, just remember that it affects everyone including their customers..